Published: 27/07/2009

Interest free borrowing is the key - The crucial element of a student bank account for the majority will be the ability to borrow funds as cheaply as possible. So whilst £50 in cash sounds tempting or a shiny new gizmo may tickle your fancy, perhaps the following stats may help you make your decision.

If you could borrow an additional £1,000 interest free, this would save you £99 per year compared to a student bank account that was to charge you interest at a rate of 9.9% for authorised borrowing.

So if you’ve done your sums and you’re likely to need to borrow £1,500 plus from year one, then Halifax, Barclays and RBS should be your first port of call.

Don’t get stung by unauthorised overdraft costs - if you don’t keep tabs on your balance and drift into unauthorised overdraft territory, you could see yourself being hit with interest rates approaching 30% EAR. Check your account regularly via online banking so you know where you stand as the last thing you want is interest charges taking a bite out of what will already be a pretty tight budget.

Most of the incentives are a waste of time – the exception to this is probably the offer from NatWest. If you’re not reliant on a huge interest free overdraft to help get you through university and will be using the train to get to and from college, take a look at the student account from NatWest which comes with a 5 year young person’s railcard worth £130.

If you’re lucky enough to have a decent credit balance, don’t leave it in your current account – most student accounts are paying either nothing or an insulting 0.10% on credit balances. Abbey and HSBC are offering 1.98%, however you can get 3.15% with the Alliance & Leicester instant access online account.Every little helps as you’ll soon discover!

Budgeting is vital, work out roughly what you’re going to spend each month and try to stick to it. Don’t get carried away and blow all your money in fresher’s week. Student life is meant to be enjoyable, but make sure your sensible hat isn’t far from your side, just because some students are splashing their cash on nights out at the student bar, don’t be tempted by peer pressure – learn to say no sometimes and try to live within your means.

Set yourself a weekly allowance for food shopping and cash for going out and make an effort to keep within it. Just draw out your allowance in cash each week and get into the mindset that once it’s gone that’s it until next week – it may seem hard at first but at least this way you won’t spend what you don’t have.

Avoid a student credit card - If you really must have a credit card in your purse/wallet make sure it’s only used for emergencies. Don’t be tempted to use it as an extension to your budget and/or overdraft because unless you’ve got the cash to clear the account in full, your measly budget will be squeezed further with interest charges at almost 20% APR! The banks will make it easy for you to apply for a card when you open your bank account, but they are really best avoided until you have a regular salary.

Don’t be scared to ask for help with your finances – if your money isn’t going as far as you’d thought and you’re in danger of going over your limit, speak to your bank – if there’s a branch on campus you’ll usually be able to speak to a student specialist who can help you out. Don’t ignore the problems, they won’t go away and could end up distracting you from your studies.

Don’t forget to take out insurance. Today’s student will be armed with a host of electrical goodies such as Ipods, laptops and digital cameras – make sure you sign up for specialist student cover before you head off for uni.

Get a TV licence or get a fine – watching TV in the halls of residence is ok, but if you have a TV in your own room, don’t forget to get a licence or you could be hit with a fine of up to £1,000. You don’t have to pay it all in one go, check out http://www.tvlicensing.co.uk/waystopay/index.jsp

Take care when sharing a house – if your name is listed as the person paying the bill, it will be your responsibility to pay, even if you are let down by one of your housemates. This could have a serious impact on your credit rating, so make sure you can trust your friends to pay their way.